Liberum downgrades Glencore to 'sell' on weak coal outlook

4th Dec 2014 09:37

Liberum has lowered its recommendation on commodities trader and mining giant Glencore from 'hold' to 'sell', saying it is "going cold on coal"."Despite Glencore's estimated deficit of 50m tonnes in 2016, it is difficult to be confident on price recovery when coal is so severely challenged on any timescale," said analysts Ben Davis and Richard Knights.In the short term, they said that stockpiles are high and prices in the energy and coal complex have collapsed since 2011.Rising protectionism in China is "destroying seaborne demand" in the medium term. The country raised import tariffs in October and could potentially drop export tariffs next year.Meanwhile, over the long term, the analysts said that "health concerns" are driving investment away from coal power generation.Davis and Knights said Glencore has a "stretched net present value valuation" and the outlook for both coal and copper - Glencore's largest earnings contributor - is weak.The broker has given Glencore's a target price of 280p, compared with Thursday's price of 321.5p, down 0.3% on the day.